No. of Recommendations: 5
To Exxon’s credit, its consistent capital spending since 2019—even during the depths of the pandemic—appears to be paying off. Exxon had $94 billion in capital expenditures from 2019 to 2023, about 67% more than what Chevron spent over that time. In Guyana, where a lot of that spending was directed, all of its three projects are producing above their initial design plans and achieved record gross production in the first quarter. In the Permian Basin, another area Exxon plowed money into, it has more than doubled production volume since 2019. Exxon’s execution has arguably looked better than that of Chevron, which had run into delays and cost overruns on its joint-venture expansion project in Kazakhstan. Chevron also missed its production growth target last year.
Exxon is well ahead of Chevron in its land grab: Exxon’s acquisition of Permian producer Pioneer Natural Resources is still expected to close in the second quarter. It could widen its lead even more if its challenge against an element of Chevron’s acquisition of Hess prevail
https://www.wsj.com/business/energy-oil/exxon-spen...
No. of Recommendations: 14
At the 2018 Investor Day, XOM laid out it's future plans in a level of detail that hadn't happened before Darren Wood took over as CEO. He (correctly) judged that XOM was following the right strategies, but that they weren't understood on Wall Street. So, versus the past, he brought in only the top executives to present the plans. Plans that were developed in 2017. He said the emphasis would be on Guyana, the Permian, integrating the Permian with the downstream in a coordinated master plan, expansion in LNG, Brazil, focusing on advantaged petrochemicals, and reducing costs. He pointed out that XOM had already acquired attractive properties during prior years when they "leaned in" while the industry was pausing. Their plans were to continue to develop these attractive opportunities. Darren Woods was challenged "why are you doing this instead of buybacks like your competitors?" He said "Because they're better businesses than the ones we have now." The focus was on upgrading the company.
Woods was roundly criticized for continuing to invest in capex during the Saudi-Russia price war followed by the Pandemic which crushed demand. XOM went to extreme lengths to not cut the dividend. They cut way back on expenses - e.g. layoffs, employee matching on savings, executive bonuses, and stretching the balance sheet to the breaking point. They slowed, but continued, their capex in key projects. And, like OXY, thanks to the vaccines turning around the pandemic, they rode out the storms. It was a close call, but they stuck to their plans and made it out.
Since then, only Brazil has been a disappointment. All the others have met or exceeded plan targets. They have reduced annual expenses by $10 billion on the way to the promised $15 billion by 2027. They have completely reorganized the company along value chain operations while consolidating all support functions into single groups. All project management has been consolidated. Ditto research. Ditto all support functions. All teams now work together on major projects.
Now they stand, again, at the top of the industry. They're forecasting 10% annual growth rates in profits, and even more with the Pioneer acquisition.
People overlook the advances that have been made in XOM. They are prioritizing investment opportunities to only high return projects. Meanwhile BRK looks for opportunities.
I'm happy I hold both.
No. of Recommendations: 4
Perhaps a more specific response to rnam.
At the time Buffett bought much of his Chevron, it had a higher dividend, higher buybacks, and a stronger balance sheet compared to ExxonMobil. This was when the O&G industry was in turmoil from the price wars and the pandemic. Chevron is a strong, well managed, company. Who can fault the safer choice at the time?
And OXY remains an almost pure play on the Permian. While dividends and buybacks are still largely in the future, the long run in the Permian seems very solid. He knows the company, likes the CEO, likes her plans, and sees limited downside. Why not continue to invest at basically the same prices where you established your initial positions?
Perhaps the question is why didn't Buffett & team keep up with the progress XOM was making? And make use of its large and liquid cap to deploy billions of the huge cash hoard in addition?
I've sure wondered that myself.
My speculation is that Buffett doesn't want a larger position in the stock market in general at current price levels. And the higher interest rates on cash help reduce the potential opportunity cost of such. And, maybe in particular, he doesn't want a higher position in the cyclic O&G industry. Maybe the thinking is that O&G will also drop in price rapidly with the market prices if a major economic downturn happens. And the money tied up in buying XOM won't be available at the exact time he wants it to buy market bargains.
Has this cost him some potential profits? Yes. The XOM performance and plans have been well laid out in public. I hope he or his team are following them. But maybe possible future opportunities outweighs near term profits in his judgment.
I'd love to see him answer a question on the subject. But I know he won't, so why bother?
No. of Recommendations: 2
Under previous managment XOM made a very poor acquisition of XTO. So their capital allocation has not always been stellar.
